MATEC Web of Conferences 53 , 010 5 0 (2016 )
DOI: 10.1051/ m atecconf/ 2016 5 3 0 1 0 5 0
C Owned by the authors, published by EDP Sciences, 2016
Organization of Business Processes of the Company
on the Basis of the Systems Approach Teners
1
1
1
Valentina Vaganova , Lubov Vorona-Slivinskaya , Anna Medvedeva and Svetlana Kuzmina
1,a
1
Saint-Petersburg University of State Fire Service of the Ministry of the Russian Federation for Civil Defense,
Emergencies and Elimination of Consequences of Natural Disasters, Moskovsky pr. 149,Saint-Petersburg, 196105,
Russia
Abstract. The article considers the management specificity on the basis of the systems
approach tenets and description of business processes of the industrial enterprises. As the
Company is a service-provider, its functional features are taken into consideration when
modeling the business processes. The authors highlight challenges the Company faces in
performance management because the existing system doesn't allow to predict the financial
results at the stage of formation of orders portfolio, to evaluate adequacy of financial resources
to objectives set and to operate cash flows. All these issues are considered in sufficient detail
when analyzing a range of problems and are taken as a basis of the project on implementation
of the budgeting system based on the process approach.
1 Introduction
The enterprise (further the Company), whose design of the systems approach to business-process
management is taken as a basis of the study, renders the wide-ranging environmental impact
assessment services [1].
Indispensable condition for work of any organization operating hazardous production facilities,
generating waste, releasing contaminants into the atmosphere or water objects is compliance with
requirements of the industrial ecology [2-4].
The concept of industrial ecology includes assessment and monitoring of chemical and biological
pollution of the environment by the industrial enterprises, regulation of economic efficiency of actions
on protection from pollutions and compliance of the industrial processes with the legal requirements.
To identify, monitor and standardize harmful impacts on environment, the law provides a list of
mandatory documents to be developed by legal entities and individuals, whose activity have direct or
indirect impacts on environment (emission and/or dumping of the polluting substances, generation of
production and consumption waste) [5-8].
Taking into account extensiveness of the environmental legislation, complication and diversity of
the requirements in this field, one should have profound knowledge of laws, responsibility for legal
and engineering decision-making, ability to predict the consequences. These demand the expert
knowledge in the fields of ecology and industrial safety [9, 10].
a
Corresponding author : kuzmina2003@bk.ru
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2 Problem statement
Today it is safe to say that even the large industrial enterprises and organizations mostly prefer to
outsource solving of these problems to the specialized expert organizations, rather than to train and
employ stuff experts. This, in turn, is related to the concepts "environmental works and services",
"market of environmental works and services", their development and application [12].
The environmental services provided by the Company are:
inventory of pollution sources (air, water, waste);
development of environmental projects for any type of industrial enterprises;
consulting services in the fields of environmental security and environmental protection;
environment-related information services;
environmental audit, independent environmental assessment (including public assessment).
The Company is registered as a small business entity. Its core activity is research and development in
the fields of natural and engineering sciences.
The income of the Company consists of two components:
revenue from engineering/ technological projects in the fields of development and coordination
of documentation in the sphere of industrial ecology and elimination of oil spills;
revenue from expertise in the international and regional projects.
The core activity of the Company is development of the project documentation in the field of
industrial ecology, approval and examination of projects. The list of the projects developed by the
Company includes:
1.
Plans on Prevention and Elimination of Oil Spills (PEOS);
2.
Plans on Emergencies Elimination (PEE);
3.
Plans on Localization and Elimination of Accident (PLA);
4.
Material Safety Data Sheet of Dangerous Object (MSDSDO);
5.
Draft Standards on Waste Formation and Limits on their Placement and Passports of Dangerous
Waste (DSWFLP);
6.
Draft Standards of Maximum-Permissible Emissions of the Polluting Substances in the
Atmosphere (MPE);
7.
Standards on Admissible Dumpings of the Polluting Substances in Environment (SAD);
8.
Actions on Assessment of Impact on Environment (AAIE);
9.
Projects of Justification of the Size of the Sanitary Protection Zone (SPZ).
The advancing activity of the Company is rendering environmental support to the enterprises
(outsourcing).
The Company also renders expert services, participating in the international and regional
environmental projects.
However the existing performance management system doesn't allow the Company to predict the
financial results at the stage of order portfolio building, assess adequacy of financial resources to the
targeted objectives and operate cash flows.
This range of problems was has been taken as a basis for the project on implementation of the
budgeting system based on the process approach [12, 13].
2.1 Stage of the Company’s life cycle and setting objectives in course of implementation
of the budgeting system
For today the Company has passed the stage of formation and search for its market niche and
mastering the survival skills. The long-lasting formation stage is characterized by a simple and
informal organizational structure without clear division of functions and financial responsibility
centers, and also by concentration of powers in hands of owners. There was no budgeting system, the
managerial decisions were generally made by the Company’s owners on the intuition basis. From time
to time there were disagreements among founders concerning the accepted managerial decisions.
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SPbWOSCE-2015
Nevertheless, the Company managed to occupy its market position, achieve competitive edge and
create positive reputation.
Now the challenge for the Company is to stabilize its position, fully realizing its available
advantages. Today it is necessary to model its business processes, form the organizational-andfinancial structure, using a linearly-functional principle, namely to establish the financial
responsibility centers, bring powers down to managers, formalize procedures, focus on sales growth.
It is also necessary to form a reserve fund and establish tight control over expenses [15].
The model of budgeting system being developed on the basis of the process approach consists of
the following stages:
1. Task definition and collection of information, necessary for budgeting.
2. Examination and analysis of the available information, generalization and analysis of the past
achievements, calculation of performance indicators, draft budgeting.
3. Expert examination and evaluation of the draft budget.
4. Adoption of the budget.
2.2 Results
The business processes of the Company are relatively simple due to its specificity and operation in the
services sector.
When modeling, all the business processes of the Company were divided into 3 groups (Fig. 1):
1. Core business processes.
2. Supporting business processes.
3. Management business processes.
This modeling has resulted in formation of the financial responsibility centers, including: profit
centers, revenue center, cost centers and investment center.
Business Processes of the Company
Core business processes
Supporting business
processes
Management business
processes
Paperwork
Insurance and SRO
Strategic
Management
Ecological Audit
Maintenance
Department
Financial
Management
Participation in
International and
Regional Projects
Juridical Ensuring
Marketing
Management
Personnel
Management
Figure 1. Business processes (BP) of the Company
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Development of the budgeting model is based on the following assumptions. As the financial
status of the Company is displayed in a format of three main statements (balance sheet, profit-and-loss
statement, cash flow statement) forming the system of economic assessment of the Company’s
performance, the most effective financial management is possible when the budgeting of the
Company’s economic activity allows to link all these statements [12, 23-25].
It is expedient to organize the financial planning according to the following scheme:
REVENUE-AND-EXPENDITURE BUDGET =>; CASH FLOW BUDGET
(DIRECT METHOD) =>; BALANCE SHEET BUDGET
Suggested is the following budgeting procedure:
The Financial responsibility centers of the enterprise draw up revenue-and-expenditure budgets
and BCF. The costs centers draw up budgets of labour remuneration, overheads, purchases, business
and managerial expenses.
Allocation of the Company’s services among the profit centers is presented in Table 1 [17].
Table 1. Allocation of the Company’s services among the profit centers
No
1
2
3
Profit center
Services
Customers
Development of PEOS,
AAIE, PLA, MSDSDO
Enterprises of the
oil and gas industry,
Large and mediumsized industrial
enterprises,
environment-related
public
organizations
Department of
environmental
design
Development and
coordination of the
DSWFLP, MPE, SAD
projects, and so forth.
Environmental
maintenance of activity of
the enterprises
(outsourcing)
Environmental audit
All enterprises and
the organizations
having the status of
nature users
Department of
international
projects
Expert, organizational,
coordination services with
participation in the
international and regional
projects
in the environmental field
The interested
commercial, semistate, public
organizations,
funds, state bodies
of Russia, Norway,
Finland
Department
Financial
responsibility
Director – 1
Experts – 2
Director – 1
Experts – 2
Director – 1
Manager – 1
These budgets being consolidated within the framework of the whole enterprise enable to draw up the
revenue-and-expenditure budget and the cash flow budget (Fig. 2).
The profit centers draw up sales budgets, direct costs budgets, labour remuneration budget and
overheads budget. The costs centers draw up a labour remuneration budget, overheads and marketing
budgets. Consolidation of the above-mentioned budgets enable to draw up the enterprise-wide master
budget.
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Sales Budget
Labour
Remuneration
Budget
Costs Budget
Overhead Costs
Budget
Commercial
and Managerial Expenses
Budget
Incomes and Expenses Budget
Cash Flow Budget
Figure 2. Model of the Company’s budget
It is usual for the budget period to be a year, broken down into a month or a quarter control
periods.
The general financial plan is formed by consolidation and coordination of the financial plans for
business lines and includes the revenue-and-expenditure budget and expected balance, and simplified
taxation plans:
sales budget;
cost budget;
overheads budget;
commercial and managerial expenses budget;
revenue-and-expenditure budget, cash flow budget and break-even point.
The new budgeting model was used for drawing up the master budget of the Company: the
revenue-and-expenditure budget, the cash flow budget and calculating of the break-even point.
3 Conclusions
Calculation of the break-even point is one of the major tasks when planning sales of products and
services.
The break-even point is a point at which total cost and total revenue are equal. There is no loss or
profit. It represents the sales amount that is required to cover total costs. Sometimes it is also called
the critical volume: the minimum output that must be exceeded in order to make profit.
To calculate the break-even point, total costs are disaggregated into fixed and variable costs. In
theory, variable costs are increasing in proportion to increase in production (sales) of products. Fixed
costs are not dependent on volume of the produced (sold) products and services and business activity.
Break-even point = Revenue x Fixed costs / (Revenue – Variable costs)
Thus, to cover the Company’s total costs in 2015, its annual revenue shall be at least 13 117 069
rubles
Table 2 –Data for the break-even chart
% of services
provided
0%
10%
20%
Fixed costs, ruble
Variable costs, ruble
8 149 975
8 149 975
8 149 975
8 149 975
8 207 821
8 265 668
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Revenue,
ruble
2 305 000
4 610 000
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30%
40%
50%
60%
70%
80%
90%
100%
8 149 975
8 149 975
8 149 975
8 149 975
8 149 975
8 149 975
8 149 975
8 149 975
8 323 514
8 381 360
8 439 206
8 497 053
8 554 899
8 612 745
8 670 591
8 728 438
6 915 000
9 220 000
11 525 000
13 830 000
16 135 000
18 440 000
20 745 000
23 050 000
The cash-flow forecast for 2015 (Table 2) has shown annual cash revenue of 25 164 400 rubles,
that gives reason to believe that, in case of successful implementation of all the projects, the revenues
will allow not only to avoid losses, but also to get profit (Fig. 3).
Break-even chart
Constant costs, rub.
Variable costs, rub.
The sales proceeds, rub.
Figure 3. Break-even chart
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